All posts tagged Antonis Samaras

ATHENS—A recent wave of politically motivated violence—culminating in the killing of a left-wing rapper Wednesday morning—has shocked Greece and once again stoked fears about civil unrest in Europe’s most indebted country.

But for Greece’s government, struggling to implement a tough reform agenda demanded by international creditors, the latest problems on the street may be a blessing in disguise.

Greek Prime Minister Antonis Samaras likely went into his meeting European Central Bank President Mario Draghi Tuesday with an eye on one major target: to persuade the ECB to give up its seniority status on its holdings of Greek debt, says senior Brookings Institution fellow Domenico Lombardi.

Mr. Lombardi, a former representative on the International Monetary Fund’s executive board for Italy, says Mr. Samaras is likely trying to leverage the ECB’s announcement last week that it won’t impose privileged creditor status on any bond purchases as part of its new program meant to stabilize the ailing euro debt markets.

An official-sector restructuring would help jump-start the woeful Greek economy. But it would also lower the country’s debt ratio to a level more in line with the parameters that the IMF, as a bailout partner with Europe, thinks is necessary to continue its lending program.

“It would encourage a re-engagement of the IMF in Greece,” Mr. Lombardi says. “In fact, the IMF is bound to fund ‘sustainable policies’ in any borrowing country and the current outlook in Greece—with GDP in freefall and the debt-to-GDP ratio skyrocketing—looks anything but sustainable,” he added.

The euro is sitting on a three-legged stool and all three of the legs could snap at any time.

Greece’s deficit position is deteriorating even more rapidly than expected with Athens once again seeking an extension to its budget-cutting plans.

Spain is still in a stand-off with the European Central Bank, hoping that by delaying a formal request for a bailout the country will be able to avoid any new onerous austerity measures.

And the third leg is the ECB itself, with its proposal for using government bond purchases to help cap the funding costs of weaker debtor nations in the euro zone.

Although German Chancellor Angela Merkel has expressed support in principle for the ECB’s proposals, actual implementation of the plan appears fraught with practical and political difficulties.

According to a report in Der Spiegel over the weekend, the ECB would essentially pledge to buy government bonds to prevent yields rising above a certain level.

What yield level would be chosen and the size of any ECB bond-buying exercise is unclear. As is the legality of the plan, given that the ECB’s mandate doesn’t extend to monetizing debt, i.e. buying government bonds.

Whether Ms. Merkel would actually support a plan that allows the central bank to start printing money, weakening the monetary position of Germany itself, remains to be seen.